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Government and Institutions

Subsidiarity needs to take its rightful place at the EU

Philip Booth and Diego Zuluaga
29 February 2016

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The subsidiary principle is a well-established notion in Catholic social teaching. It was also intended to be a core principle of the 1992 Maastricht Treaty.

Subsidiarity is commonly taken to mean that legislative decisions should be made at the lowest possible level, yet there is a tension between the original – Christian – definition of the subsidiary principle, and the way it has been adopted by the EU.

The Christian conception of subsidiarity is best captured by the following passage of Quadragesimo anno, Pope Pius XI’s 1931 encyclical:

“Just as it is gravely wrong to take from individuals what they can accomplish by their own initiative and industry and give it to the community, so also it is an injustice and at the same time a grave evil and disturbance of right order to assign to a greater and higher association what lesser and subordinate organisations can do. For every social activity ought of its very nature to furnish help to the members of the body social, and never destroy and absorb them.

The supreme authority of the State ought, therefore, to let subordinate groups handle matters and concerns of lesser importance, which would otherwise dissipate its efforts greatly. Thereby the State will more freely, powerfully, and effectively do all those things that belong to it alone because it alone can do them: directing, watching, urging, restraining, as occasion requires and necessity demands.”

Four things are of note here.

Firstly, Pope Pius says that higher-level organisations should not do those things that can be done at the lower level. In other words, the hurdle for action by the state (still less by the EU) is a high one: it is not that the EU should do those things it might be able to do better, it should do those things that cannot be done at the lower level.

Secondly, insofar as the state (or the EU) does act, it should do so in a way such that it helps society and families rather than directs them or takes over their functions. A good example here – though not relevant to the EU – would be in the field of education. It is not for the state to direct parents as to how they should educate their children; however, it can help parents educate their children by providing finance if necessary.

Thirdly, the state is charged with those things that are most important. We could argue about what these things should be but they would intend to include the administration of justice, keeping the peace, and so on. These things are often important in a somewhat abstract sense (because we only notice their importance when they are not provided properly and society disintegrates).

Finally, subsidiarity is not just about hierarchies of government. Functions that can be undertaken by civil society (health, welfare functions and so on) should be left to such organisations.

The conception of subsidiarity in Quadragesimo Anno contrasts with the definition given in Article 5 of the Treaty on European Union:

“Under the principle of subsidiarity, in areas which do not fall within its exclusive competence, the Union shall act only if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the Member States, either at central level or at regional and local level, but can rather, by reason of the scale or effects of the proposed action, be better achieved at Union level.”

In other words, the EU is obliged to act where it believes it is more effective or could achieve the objectives better. Indeed, it gets worse. In a further explanation of the principle of subsidiarity, the EU argues that: “The principle of subsidiarity also aims at bringing the EU and its citizens closer by guaranteeing that action is taken at local level where it proves to be necessary.” This inverts the burden of proof. There is also the other question of who decides what is to be done. In Catholic teaching the state is there to serve society and the family, not the other way round. Initiative should not be assumed to come from the top.

In summary, the Christian conception implies a bias towards decentralisation. The EU interpretation introduces a centralising bias.

Under the existing EU definition, the transfer of virtually any power can be justified on the basis that EU institutions are better placed to promote trade and more equal conditions across the Union. Consider, for example, the issue of the regulation of insurance. There is no question that this can be done by member states (or, for that matter, by professional bodies and other intermediary organisations). Indeed, insurance is largely regulated by member states at the moment, though this will change in the near future.

Whilst insurance regulation can be undertaken by member states, the EU argues that trade is less costly and economic outcomes better if there is a single rulebook for all insurance firms in the EU. This is the basis of the programme known as “Solvency II”. So, the EU fulfills the principle of subsidiarity as it appears in the treaties but, without question, the Catholic interpretation of the principle has been breached.

There are many reasons to prefer the Catholic definition from a constitutional and an economic perspective. There is, to begin with, the normative argument that power and authority belong as close as possible to the people affected. Lower-level organisations are, by definition, closer to individual people and families than higher-level ones. Thus, so long as the former can achieve the desired objectives, it would seem improper to assign the relevant powers to higher bodies.

Higher level political organisations have a tendency to acquire powers and to drift towards centralisation. And, this is the difficulty with the Single Market Act and the powers it gives to the EU. Almost any action can be justified on the grounds that it promotes uniformity within the single market and therefore makes the single market more effective – and thus the principle of subsidiarity is almost never applied.

Instead, the treaties of the EU should have been devised so that different questions are asked such as: “is this measure necessary for the free movement of goods and services across the EU?” If a measure is desirable to those at the centre, but not necessary, it would not pass the principle of subsidiarity. That does not mean, of course, that member states could not combine together to take action themselves (for example, to unify their regulatory systems in the case of insurance). But, the problem is that the burden of proof is the wrong way round and we need a system whereby member states cede powers upwards at their choosing rather than the EU pontificating from above.

Decentralisation allows different communities to try different approaches to solving economic and social problems in a way that best fits their local circumstances and the preferences of their members. And decentralisation is empirically vindicated. The OECD has found that fiscal decentralisation is associated with higher economic growth.

The process of European integration has, for many years, been plagued by a wrong-headed interpretation of the division of powers among the different levels of government. The EU’s interpretation of subsidiarity lies at the heart of this misguided trend. If we wish European integration to work and to allow individuals, families and communities to flourish, we need to return to the original conception of the subsidiarity principle – one that emphasises free will and encourages responsibility.

Prof Philip Booth is the IEA’s Academic and Research Director, and Professor of Finance, Public Policy and Ethics at St. Mary’s University, Twickenham. Diego Zuluaga is the IEA’s Financial Services Research Fellow and Head of Research at EPICENTER. 

This article was first published by Reimagining Europe.

Philip Booth
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Academic and Research Director, IEA

Philip Booth is Senior Academic Fellow at the Institute of Economic Affairs. He is also Director of the Vinson Centre and Professor of Economics at the University of Buckingham and Professor of Finance, Public Policy and Ethics at St. Mary’s University, Twickenham. He also holds the position of (interim) Director of Catholic Mission at St. Mary’s having previously been Director of Research and Public Engagement and Dean of the Faculty of Education, Humanities and Social Sciences. From 2002-2016, Philip was Academic and Research Director (previously, Editorial and Programme Director) at the IEA. From 2002-2015 he was Professor of Insurance and Risk Management at Cass Business School. He is a Senior Research Fellow in the Centre for Federal Studies at the University of Kent and Adjunct Professor in the School of Law, University of Notre Dame, Australia. Previously, Philip Booth worked for the Bank of England as an adviser on financial stability issues and he was also Associate Dean of Cass Business School and held various other academic positions at City University. He has written widely, including a number of books, on investment, finance, social insurance and pensions as well as on the relationship between Catholic social teaching and economics. He is Deputy Editor of Economic Affairs. Philip is a Fellow of the Royal Statistical Society, a Fellow of the Institute of Actuaries and an honorary member of the Society of Actuaries of Poland. He has previously worked in the investment department of Axa Equity and Law and was been involved in a number of projects to help develop actuarial professions and actuarial, finance and investment professional teaching programmes in Central and Eastern Europe. Philip has a BA in Economics from the University of Durham and a PhD from City University.


Diego Zuluaga
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Policy Analyst at the Cato Institute's Center for Monetary and Financial Alternatives

Diego was educated at McGill University and Keble College, Oxford, from which he holds degrees in economics and finance. His policy interests are mainly in consumer finance and banking, capital markets regulation, and multi-sided markets. However, he has written on a range of economic issues including the taxation of capital income, the regulation of online platforms and the reform of electricity markets after Brexit. Diego’s articles have featured in UK and foreign outlets such as Newsweek, City AM, CapX and L’Opinion. He is also a frequent speaker on broadcast media and at public events, as well as a lecturer at the University of Buckingham.


2 thoughts on “Subsidiarity needs to take its rightful place at the EU”

  1. D.R. Myddelton
    Posted 29/02/2016 at 13:53 | Permalink

    Keynes touched on this point in his essay ‘The End of Laissez-Faire’ (on page 291 of Vol. IX of the Collected Edition): “The important thing for government is not to do things which individuals are doing already, and to do them a little better or a little worse; but to do those things which at present are not done at all.”

  2. Andrew Carey
    Posted 29/02/2016 at 22:07 | Permalink

    Fabulous article. And some useful material to use to suck up to my Catholic relatives. Who would have thought a pontiff could come up with that?

Comments are closed.


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